With the dip in the price of crude oil, Nigeria has experienced decline in its foreign revenue, and this has affected the Naira adversely. The Naira suffered a devaluation in 2014 and again recently as a result of market activities propelled by CBN foreign exchange policies. These developments have seen many companies scale down activities and has inevitably increased unemployment, given the import dependency of many Nigerian companies.
Notwithstanding the fact that Nigeria recorded a positive balance of trade of about ₦480 million, crude exportation accounted for most of this. According to the Nigerian Bureau for Statistics, export decreased from about N1, 014, 713 billion in March 2015, from about N1, 306, 399 billion in February 2015. The reason for this is not farfetched, taking into consideration the fact that crude export is the major growth driver of the Nigerian economy and accounts for about 91% of the country’s total export.
Considering that 43% of our total crude export went to Europe, as well as the opening up of the Panama Canal for easy distribution of shale to Europe, our situation might get even worse. With the nuclear deal which saw the lifting of international sanctions on Iran, a further dip in the price of crude has been projected. Iran boasts of the world’s third-largest oil and gas reserves in the world, and it is anticipated that there will be substantial investment in the Iranian oil and gas sector, thereby increasing crude supply. This is not good news for Nigeria.
In recent times, there has been a major clamour for the diversification of the Nigerian economy. Positive steps were taken in this direction by the past administration spearheaded by the then Minister for Agriculture, Mr. Akinwumi Adesina. The sector has recorded significant growth and has also been opened up to Investors. Before the discovery of crude in Nigeria, agriculture was the major driver of growth, creating about 70% of total employment, and accounting for about 80% of Nigeria’s total export. In the early 1960’s, the agricultural sector generated about 50% of total government revenue and made up about 65% of the GDP.
The rejuvenation of the Agricultural sector through the past administration’s Agricultural Transformation Agenda (ATA) has seen a consistent growth in the contribution to GDP. Agriculture contributed N3, 176, 598.13 in the first quarter of 2015 and N3, 477, 845.24 in the second quarter of 2015. Today, agriculture is no regarded as merely a way of life for the rural dwellers, but is considered as big business. With the global and domestic demand for crops such as maize, cotton, cassava, cocoa etc. and increased clamor for food security, there are enormous investment opportunities in the Agricultural sector.
The ATA initiative has drawn immense attention to the agricultural sector, and part of the result yielded by the initiative is the improvement in food security and easy access to financing through the introduction of key initiatives such as Funds for Agricultural Financing (FAFIN), a private fund jointly set up by the governments of Nigeria and Germany to raise private capital for funding agriculture and the Nigerian Agricultural Cooperative and Rural Development Bank Limited (NACRDB) which is a Federal government owned development bank with a mandate to provide low cost credit to small holder and commercial farmers, and small and medium rural enterprises. Other initiatives include the Agricultural Credit Guarantee Scheme Fund (ACGSF), Agricultural Credit Support Scheme (ACSS), Commercial Agriculture Credit Scheme (CACS), the International Fund for Agricultural Development (IFAD), and Agricultural Development Trust Fund Credit (ADTFC). According to Dr. Akinwumi Adesina, “agricultural lending as a share of total bank lending rose from 0.7% to 5% within two years of the ATA. He stated also that Bank lending to seed companies and small agricultural input retailers rose from zero in 2011, to $10 million in 2012 and $53 million in 2013, while Bank lending to fertilizer companies rose from $100 million in 2012 to $500 million in 2013.
Despite these reforms, the sector is yet to attain its full potentials. There still exists trade deficits locally and globally. The local demand for agricultural products is still significantly higher than local production, and this throws open enormous opportunities in the sector. According to the Bureau for Statistics, the crop and livestock production subsectors which are the major drivers of the Agricultural Sector have recorded a growth of 73.73% and 17.74 % respectively in the first quarter of 2015.
There is no gainsaying the fact that there are significant investment opportunities in the Nigerian Agricultural sector. Market segments such as livestock and poultry, fish production, food processing and preservation, crop cultivation, seed production and distribution, supply of agricultural inputs and machineries, exploitation of timber and wood processing and commodity trading and transportation, are yet to be maximally explored. These opportunities suggest that agriculture is vital to solving issues of food shortage, unemployment and poverty, all of which plague the country.
With the favourable natural conditions of the Nigerian climate, agribusiness will thrive and contribute immensely to wealth creation in Nigeria. For instance, aquaculture or fish production is growing at more than 20% per year and presents a significant opportunity with an estimated gross margin of about 20%. Complementary to aquaculture is fish feed processing which is commercially attractive, giving the high demand and insufficient domestic supply.
Local breeding of livestock and poultry will significantly reduce demand for and importation of foreign livestock and poultry (with the attendant health hazards) and all by products obtainable therefrom. In 2012, demand for livestock and poultry items was estimated at 800,000 metric ton (MT) while local production was only 300,000 MT. This resulted in a shortfall of 500,000 MT valued at USD500 million.
There are enormous investment opportunities for foreign direct investment in the agricultural sector. Whilst it is not yet uhuru for Agriculture in Nigeria, significant strides have been made and with the much anticipated developmental focus on the sector by the Buhari Administration, good times are certainly ahead.